Parallel Petroleum Acquires Stake in Fullerton Field

Parallel Petroleum's wholly owned subsidiary, Parallel, L. P., has purchased an additional interest in its Lineberry and Grogan leases located in the Fullerton Field of Andrews County in the Permian Basin of West Texas for a net purchase price of approximately $5.63 million. The additional interest was acquired from Kaiser-Francis Oil Company. Parallel financed the acquisition using a portion of its revolving credit facility provided by First American Bank SSB, BNP Paribas, Citibank, F. S. B. and Western National Bank. The effective date of the acquisition is September 1, 2004.

Property information

The Lineberry and Grogan leases cover approximately 720 contiguous gross acres and consist of 21 gross producing oil and gas wells that produce from the San Andres formation at a depth of approximately 4,800 feet. This acquisition has increased the Company's working and net revenue interests in these two leases from an average 35.3% working and 26.3% net revenue interest to an average 76.5% working and 58.9% net revenue interest.

Reserves and production

The additional interest acquired in this transaction represents an estimated 540,000 equivalent barrels of proved oil and gas reserves, net to Parallel, of which 73% is proved developed producing reserves. The production acquired in this transaction represents approximately 100 equivalent barrels of oil per day, net to Parallel, which is unhedged.

Management Comments

Larry C. Oldham, Parallel's President and CEO, commented, "This acquisition, along with our previously announced $15.3 million acquisition of Chevron U.S.A. Inc.'s interest, increases and consolidates all our ownership interest in the Fullerton Field under one operation. This action will create operational synergies resulting in increased efficiency and operating margin."

Oldham further commented, "Since December 2002, the Company has acquired, in the Fullerton Field, approximately 11.65 million equivalent barrels of proved oil and gas reserves for an estimated total combined acquisition price of $67 million or approximately $5.75 per equivalent barrel of oil."

In a final comment, Oldham stated, "We expect this acquisition and the Chevron U.S.A. Inc. acquisition to be accretive to earnings and operating cash flow beginning in the fourth quarter 2004."